Mega deals dominate in 2015

BY Richard Summerfield

2015 was the year of the mega deal. Last year there were more than 67 announced deals valued at $10bn and above for a combined total in excess of $1.86 trillion, according to Dealogic.

2015’s mega deal volume more than doubled 2014's $803.4bn total. Furthermore, the number of such deals surpassed the previous record of 48 set in 2006. Transactions valued at $50bn or more in 2015 totalled around $730bn.

Many of the mega deals completed last year were the largest ever deals in their particular sector, including the tie up between Dow Chemical and DuPont. Pfizer's $160bn merger with Allergan is the largest healthcare deal in history, and the second-largest deal of any type on record.

The revival of the mega deal was part of a larger resurgence in general M&A activity over the last 12 months. Indeed, 2015 was a bumper year for deal making, with more than $4 trillion worth of announced deals.

The Americas was the most fertile region for mega deal activity, with around 50 deals announced in the region for a total value of $1.40 trillion. This is even more remarkable considering the region's previous record, set in 2014, of 19 mega deals for a total value of $512.1bn. Elsewhere EMEA and the Asia Pacific regions saw nine and eight deals respectively, for combined totals of $301.2bn and $171.8bn.

Global M&A volume has been on an upward trajectory since 2012, however the increase seen between 2014 and 2015 was remarkable.

It is not just the firms involved that have benefitted from the resurgence in mega deals; investment banks also enjoyed a bumper 2015. Fees from completed M&A advisory increased globally. According to Dealogic, Goldman Sachs led the global M&A advisor ranking in 2015 with $1.76 trillion. Morgan Stanley and JPMorgan also enjoyed a successful year with $1.50 trillion and $1.49 trillion respectively.

Report: Dealogic – M&A Statshot

Record breaking year for M&A

BY Richard Summerfield

2015 was a momentous year for M&A activity, with mega-deals once again a key feature of the corporate landscape.

New data from Thomson Reuters suggests that M&A activity totalled $4.2 trillion in 2015, breaking the all time annual record thanks to a 42 percent increase over 2014’s record. Mega deals were undoubtedly the driving force behind the impressive figures recorded this year.

"It's the most prolific year that we've ever seen since we began tracking M&A in 1980," said Matthew Toole, Thomson Reuters’ Director of Deals Intelligence. "Companies are looking for revenue growth, they're also looking to streamline and get rid of businesses that are non-core.

"And as companies consolidate at the top, it filters down to other companies looking to see what do we need to do to compete in this landscape," he added.

According to Thomson Reuters, the $191.5bn merger of Pfizer and Allergan was the deal which pushed 2015 past 2007’s record of $4.1 trillion. The healthcare and pharmaceutical sectors were two of the most prolific for deal activity, seeing $649.4bn and $415.6bn worth of deal activity respectively.

In the context of recent years, 2015 was a show stopping year for both industries. The $649.4bn worth of deals recorded in the healthcare space equates to more than the previous two full years worth of deals combined. For the pharma sector, 2015 exceeded the combination of the last three full years combined.

Financial engineering played a significant role in the success of some of the bigger deals in the pharma and healthcare spaces. Inversion deals, which have angered politicians on both sides of the aisle in the US, have continued to be a major factor in US deal making. Pfizer took advantage of an inversion to relocate to Ireland, and substantially reduce its tax bill.

Away from the pharma and healthcare industries, there were a number of other impressive deal making hauls. Though the number of announced deals globally declined from 2014 by 2.1 percent to 39,687, there was record M&A activity in five sectors: healthcare, consumer products, retail, technology and industrials.

Furthermore, for the first time ever, there were three consecutive trillion-dollar-plus quarters in 2015, thanks to large deals including the Pfizer/Allergan tie up and Anheuser-Busch InBev's planned $120.8bn merger with SABMiller.

However, 2016 is likely to be a more challenging year. With political uncertainty likely and further interest rate increases expected, we may see a drop in deal making.

Report: Thomson Reuters Deals Insight M&A 2015

Qihoo 360 to go private in $9.3bn deal

BY Richard Summerfield

Chinese internet company Qihoo 360 Technology Co. Ltd has announced that it has agreed a $9.3bn all cash deal to be taken private by a group of investors led by the firm’s chairman Hongyi Zhou. The deal for the company, which is expected to close in H1 2016, includes around $1.6bn worth of debt. The investor’s offer for the company has already won the approval of Qihoo’s board of directors; however the transaction is still subject to the customary closing conditions.

The company will become the latest in a number of US listed Chinese tech firms to have been taken private, which has become a feature of 2015. Indeed, as of mid November 2015 around 33 mainland Chinese companies listed on US exchanges had announced more than $40bn worth of privatisation and de-listing deals. Chinese firms including Shanda Games Ltd and medical R&D services provider WuXi PharmaTech have been among those de-listing in the US. For Chinese executives and investors it is considerably easier to target US listed companies as they tend to be cheaper than Chinese traded businesses.

The deal was first mooted in June 2015 by Mr Zhou and will see an investor group including Citic Guoan Group, Golden Brick Silk Road Capital, Sequoia Capital China, Taikang Life Insurance, the Ping An Insurance Group, Sunshine Insurance, New China Capital, Huatai Ruilian, and Huasheng Capital take control of the company.

Under the terms of the offer each class A and class B share in China will be exchanged for $1.33 in cash, and each American depositary share will be exchanged for $77. The price offered for the company represents a 16.6 percent premium on the closing price of Qihoo’s American depositary shares and a 32.7 percent premium to the average closing price of the company’s depository shares in the 30 days before the proposal.

The consortium has announced that it intends to finance the deal using contributions from the investors, as well as a committed term loan of up to $3bn, as well as a bridge loan of $400m. For the investor group to have raised the cash that it has, the Chinese economy is a particularly impressive feat. Stock market volatility has been considerable in 2015.

However Qihoo’s brand in China is strong, and for the investor group the company’s is an extremely attractive proposition. Over the course of the last eight quarters the company has met or exceeded each of its revenue and earnings estimates. Equally Qihoo’s stock has climbed 27.5 percent throughout 2015.

NEWS: Qihoo 360 to be taken private in $9.3bn deal

SOURCE: http://in.reuters.com/article/qihoo-360-ma-idINL3N1473SM20151218

Newell Rubbermaid and Jarden combine to create $16bn consumer goods giant

BY Fraser Tennant

Consumer goods giants Newell Rubbermaid Inc. and Jarden Corporation have announced their intention to join forces to create a new $16bn company: Newell Brands.

Newell Rubbermaid, an S&P 500 company, is a global marketer of consumer and commercial products with 2014 sales of $5.7bn and a strong portfolio of leading brands. Jarden Corporation, a diversified, global consumer products company, has an extensive portfolio of over 120 trusted and authentic brands.

The combination of the two companies’ portfolios is expected to accelerate existing business plans in food & beverage, baby products, commercial products, kitchenware & appliances across large, growing and unconsolidated global markets that exceed $100bn.

Under the terms of the agreement, Jarden shareholders will receive $21 in cash for each Jarden share and 0.862 of a share in Newell Rubbermaid stock at closing. Once the transaction is complete, Newell Rubbermaid shareholders will own approximately 55 percent of the company.

Additionally, Newell Rubbermaid anticipates incremental annualised cost synergies of approximately $500m over four years, driven by efficiencies of scale and new efficiencies in procurement, cost to serve and infrastructure.

 “The combination of these two great companies creates a $16bn consumer goods company with incredible potential to grow and create value,” said Michael B. Polk, current president and chief executive of Newell Rubbermaid, who will lead Newell Brands upon the closing of the transaction. “The scale of our combined businesses in key categories, channels and geographies creates a much broader canvas on which to leverage our advantaged set of brand development and commercial capabilities for accelerated growth and margin expansion.”

The transaction, expected to close in the second quarter of 2016, is subject to approval by shareholders of both Newell Rubbermaid and Jarden, receipt of regulatory approvals and other customary closing conditions.

“I am delighted that we are to play a part in bringing together these two winning companies," said Martin E. Franklin, executive chairman and founder of Jarden. “The combination offers significant value for our shareholders and the opportunity to participate in the combined company’s long-term value creation potential as shareholders in Newell Brands.”

Eyeing the opportunities ahead, Mr Polk said: “I look forward to working with Martin as we drive the new Newell Brands towards its aspiration of becoming one of the preeminent consumer goods companies in the world.”

News: Newell Rubbermaid to Acquire Jarden for $15 Billion

Digital disruption drives deals – EY

BY Richard Summerfield

The digital revolution of the last few years has had a significant impact on almost all facets of our daily life. Smart phones, cloud computing and Big Data have integrated into our daily routines almost seamlessly, and it is for that reason that the digital transformation of businesses has become such a valuable development.

This emerging reliance of mobile, cloud and Big Data technology is significant for many reasons, not least of which is the manner in which it is helping to drive mergers and acquisitions in the technology space. According to a new report from EY, 'Capital Confidence Barometer – Technology', companies are turning to cloud and mobile technology as they look to remain relevant in an increasingly competitive and demanding industry. EY’s data suggests that to the end of October the value of tech related M&A deals was $396.4bn; as such, the record of $412.4bn worth of tech deals announced in 2000 is likely to have been exceeded by the end of the year.

The impressive pace of M&A driven deals is also unlikely to slow going forward, according to EY. Forty-five percent of the technology executives surveyed for the report noted that they intend to pursue deals in 2016; this number is higher than in the last three surveys carried out by EY in the third quarter of the year.

Thirty-four percent of respondents will look outside of their own sector. Thirty-seven percent believe that ‘digital future’ – EY’s term to describe the disruption of all areas of enterprise caused by technology – is the most important driver in M&A deals today.

Jeff Liu, Global Technology Industry Leader, Transaction Advisory Services at EY, said, "As the overall M&A market hits its stride, the technology sector has continued to shatter M&A records from one quarter to the next. While digital disruption is not a new story, we have clearly entered a new chapter in its impact on M&A. It is one in which the customer is becoming a more digitally empowered protagonist. Changing customer behaviour is driving technology company acquisitions of non-technology companies — and vice versa."

Given the increasing confidence in the global economy, tech companies are feeling bullish about completing further deals in the year ahead. Though many tech executives are concerned about lingering geopolitical difficulties and their effect on the wider global economy, they will not be put off pursuing deals. With companies willing to commit 60 percent of their available capital to growth in 2016, the deals will keep coming.

Report: Capital Confidence Barometer — Technology